Scott is here today to help us understand what is possible and legal with self directed IRA account. You may be surprised by how many investments you can buy with a self directed IRA. You may also be surprised at what you can’t buy.If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Trevoris my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Scott Mauerer. How are you doing, Scott?

Scott Maurer: Great, Joe. How are you doing?

Joe Fairless: I’m doing well, nice to have you on the show. A little bit about Scott – he is a self-directed IRA expert. In fact, he’s the director of business development for Advanta IRA, which is a self-directed IRA administrator. He is a licensed attorney and has worked with self-directed IRA since 2006. He is based in Tampa, Florida. With that being said, Scott, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Scott Maurer: Sure. I started with a company back in 2006, and when I started at Advanta it was just a few of us here. At that time was really the time when I think self-directed IRA’s really began hitting on a lot more people’s radar, with the last real estate boom. So I was brought in and I started with the company in handling a lot of the initial transactions, people going through the process of buying and selling real estate and other assets through their IRA account. My position really morphed from doing that as I learned more about the business, to focusing more on the education, networking, and ultimately the sales and business development side of things… And teaching classes – teaching webinars, seminars, just networking with individuals and trying to spread the word more about what self-directed IRA’s are, and how they can be used; there’s certain things that you can’t do with them, but that’s certainly what I’ve spent more of my time doing, and that’s really our current focus right now, and really it has always been – to educate as many people as possible that what you can do with IRA accounts that a lot of people simply just don’t realize it’s possible.

Joe Fairless: What are some of those things?

Scott Maurer: As we’ll talk about today, it’s investing in real estate, whether you are an investor who wants to buy single-family properties, you wanna buy properties to rehab, you wanna invest among many other individuals on some type of multifamily project and have your IRA owning a piece of the pie, lending with your IRA account; we have people wanting to buy cryptocurrency in their IRA… There’s so many different things you can buy within your IRA, you just can’t buy life insurance or collectibles – the only two types of investments the IRS prohibits inside your IRA account. So when you have an IRA with a brokerage firm or a bank, they’re limiting you to those items that they sell, those particular investments that they sell and make money from… But the IRS regulations allow for so many more different options than what you typically would have it you don’t look outside that box.

Joe Fairless: Unless I’m mistaken, there’s also some other things you can’t do, like lend money to your family and things like that, right?

When we talk about buying real estate in an IRA, we do talk about the standpoint as a pure investment vehicle; it’s not something that you can use your IRA to buy a vacation home or buy a primary residence within the account. That’s not allowed. So it’s strictly from that standpoint a pure investment inside the IRA. It’s the alternative to putting your money in stocks or mutual funds or bonds, it’s having this other options of investing in real estate and these other types of assets.

Joe Fairless: What’s a challenge that you’ve come across with this process that recently has made you think “Hm, okay, let me think through that a little bit. It’s not what I typically come across.”

Scott Maurer: Actually, I had a really interesting scenario recently. I had an individual wanting to, in the context of buying a piece of real estate – actually a very nice parcel of real estate, well over a million or two million dollars within an IRA… It was the standpoint of making sure he got all the financing, because he wanted to use his IRA, or a combination of his IRA, his wife’s and his dad’s to buy this property… But the issue he was gonna have was that he wanted to treat it more as a business, as a rental facility, as opposed to more like a rental piece of real estate. So he was transforming that idea of wanting to invest in real estate to really investing into a business using your IRA account. That’s something that is very tricky; it certainly is possible to do, but that’s something that recently I had it as a challenge and trying to talk through with that particular investor.

I spent a lot of time with [unintelligible [00:06:01].27] talking with him and his CPA about exactly how that could be structured if he was gonna go forward. I think that’s one of the more recent examples of something that’s kind of, again, outside the mainstream of what we see, that made it a little bit more challenging.

Joe Fairless: So if I’m understanding it correctly – and we don’t even have to use the specific person, but a person was looking to buy a piece of real estate, but was gonna operate it as a business? Can you just give us a hypothetical example, in case you can share a little bit of the details on this?

Scott Maurer: Yeah, the details — it was a property that I think was listed for around 1.5 million. Actually, it was built as a single-family residence, a huge, huge property… But his idea in buying this property was not to simply buy it and then rent it for rental income, but actually transform that property from a single-family residence into a commercial kind of event planning rental space, where you could host weddings and other types of conferences or things of that nature.

For him the difficulty in figuring this out is that when you’re investing in real estate with your IRA from kind of a residential or rental perspective, that’s more of a passive investment; you’re receiving rental proceeds back to your IRA, which is fantastic. But what he was looking at doing is operating it as a business, in which he was going to work for the company that is operating this event rental facility. So it was challenging for him, because there are specific rules as we’ve mentioned, that you can’t benefit from things going on inside your IRA specifically, so it was trying to find the right vehicle that was gonna make that possible and structure it…

He ended up not going forward with the deal… Not because of that reason, just because of transforming a residential property into a commercial event space apparently was a lot more involved than he had anticipated.

Joe Fairless: Yeah, but it wasn’t because he couldn’t do it, from your perspective, it was because the deal just didn’t pan out.

Scott Maurer: That’s correct. That ended up killing the deal when he realized it wasn’t gonna happen because of the different structural engineering projects that would have to take place to make it a commercial space… But we never got fully to the point of using the IRA as a 401k type situation having the business, although I think his CPA was on board with that. I think that would eventually – if he’d bought the property, that’s how they would have gone.

We were able to work through that issue, it just turned out the property itself didn’t work out for him.

Joe Fairless: Okay, so theoretically if the economics of the deal worked, then there was a way to use this self-directed IRA to do the transaction.

Scott Maurer: There was, and it involved in that scenario using your IRA and setting up this new business venture that he was going to form for this event facility, of establishing a 401k plan for that facility and using his IRA through that 401k to fund a business that he can work with. It’s a very kind of narrow concept within the IRS regulations that allows for that. It does have to be a 401k, but again, that was a challenging topic, because it started from the aspect of someone calling in and getting our name to buy real estate in an IRA account and having that morph from that initial discussion, which is again, something we deal with on an everyday basis, to something a little bit obviously more advanced, and not just simply being a piece of rental property that’s gonna collect rent 12 months a year, but actually transforming it into a commercial space that he wanted to work with… It just added so many more factors into it.

Joe Fairless: What’s the question that you get asked the most often?

Scott Maurer: I think one of the questions I get asked a lot is “Why haven’t people heard about this before?” when they call… Or then, of course, how the process works. I think the question when people find out about this, they say “Hey, I didn’t know this was possible… Why hasn’t someone told me?” The answer is simply your stockbroker, your financial advisor doesn’t always have a vested interest in telling you where else you can place your money. If you have an IRA or a Roth IRA account, or an old 401k, if you’re not looking for it, your typical advisor is not gonna tell you that self-direction is an option. That’s, again, a common question we get, is asking “Why haven’t I heard about this before? Is this something that’s new?” If they’re just hearing about it, they think it must have been something that was allowed in the last year or two, and actually it’s been around and allowed inside IRS regulations since 1975.

Joe Fairless: What’s your role with Advanta?

Scott Maurer: My role as the director of business development is to oversee basically the sales and marketing side of our business in both our Tampa office – our home office is in the Tampa Bay area; we also have an office in Atlanta. So as the director of business development, I’m overseeing the sales staff, the individuals who are talking to individuals who call in or who visit our website to get more information on self-direction, and all of us on the sales team also are just core educators.

It’s the incoming phone call, to talk someone through the process, or it’s again, teaching seminars or online webinars that we have as well, on these different topics… And just explaining the process, explaining the rules and helping people eventually just through education feel more comfortable about self-direction in general. [unintelligible [00:10:53].24] a concept going back to the common question we get of “Why haven’t I heard about this? Is this something new?”, people did wanna feel comfortable and reassure that what they’re doing is allowed, that they’re not reinventing the wheel themselves, so a part of our educational program and process is really to make it seem as easy as possible, because at its core, self-directing is really not that difficult to do, you’ve just gotta make sure you understand what you’re doing.

Joe Fairless: As the director of business development and you’re overseeing sales and marketing, your responsibility is ultimately, I imagine, to make sure you’re bringing in business and converting those leads into customers… What are some of the ways that you’ve found to be most effective for bringing in new business?

Scott Maurer: For us it’s really been networking with I think the right individuals. We focus a lot of our networking and marketing efforts in attracting CPA’s who’s clients obviously go to them for tax advice, and since IRA’s are a tax vehicle or a tax-saving vehicle, CPA’s are gonna get asked questions about self-directed IRA’s as well. So it’s really kind of forming partnerships and relationships with CPA’s, with some financial advisors who are open to the concept and who have clients asking about it.

Another area where we focus on attracting new business is people who are forming multifamily property partnerships or they’re doing large-scale investment real estate where they’re looking to raise several million dollars of capital from a number of individuals, and we can help those companies and show them ways in which they can advertise self-directed IRA’s to their investor base and help attract additional capital. That’s really what we focus on on the business development side – those kinds of strategic partnerships, and then again, just helping CPA’s, financial advisors, real estate investment professionals as well understand what the process is and then making it as easy as possible on the clients and the actual investors who are using their IRA’s to make the investment.

Joe Fairless: CPA’s and then also people putting together deals, syndicators or fund managers… Maybe not fund managers, but definitely syndicators. Any other major groups that would be the ideal networking person, entity or professional?

Scott Maurer: Certainly branching off a little bit, attorneys to some extent, who have clients and have individuals who are asking them about creative ways to buy real estate. [unintelligible [00:13:18].00] CPA’s, the syndicators outside of the real estate space, we also try to work with a lot of private placement companies. Syndicators for real estate are forming an entity to raise capital to invest in real estate, and certainly there are other individuals in the financial world who raise capital inside of partnerships or LLC’s to invest in hedge funds or startup companies… Those are other areas ancillary to real estate that we focus on.

Joe Fairless: And how do you reach those – we’ll talk about the CPA’s and the attorneys – professionals?

Scott Maurer: Well CPA’s, for one, and attorneys a little bit to an extent as well – we teach… Again, this is part of our idea of education being so important… We do continuing education classes. For CPA’s we have a two-hour proved course we offered online. We’ve done some in-person as well for attorneys and CPA’s. We provide them that education of a little bit on IRA’s in general, because not all CPA’s are as versed in the intricacies of IRA’s and contributions and distributions etc., but talking to them about that and also talking to them about what self-direction is. So we do a lot of the educational programs, webinars and seminars, and certainly reaching out to those CPA’s that are in our areas – either in our Tampa or Atlanta market – and meeting face-to-face with them, sitting down and having lunch, going to their office or whatnot and really explaining what we do.

A lot of times we’re getting calls from them [unintelligible [00:14:42].29] the incoming call from a CPA who reached out to a fellow CPA who knew about us, and from that standpoint educating them on what’s possible, so that when they get a client that’s interested or is asking questions about “I heard something about real estate with an IRA account. How does that work?” The CPA at least just knows to forward our name along to them to get the questions answered.

Joe Fairless: I asked those specific questions for two reasons. One, just to understand your approach, and for the Best Ever listeners who are passively investing in deals to understand if they are speaking to a CPA and their CPA is not well-versed on this, then who to talk to… But then also for anyone who’s looking for private investors… So a multifamily syndicator or a fix and flipper – you’re basically targeting the gatekeepers of the people who have access to a lot of individuals who have money, and as a fix and flipper or a multifamily syndicator, also building relationships with CPA’s would be beneficial, because we can then have relationships with someone who has relationships with a lot of people who have money.

Scott Maurer: Yeah, without a doubt. That’s why we try to do a couple things from a marketing standpoint to help syndicators and people who are raising capital. We’ve created a personalized landing page for them that we host, that they can put their logo and their information and use that if they’re looking — again, soliciting for more capital… An easy way to do it, if a syndicating is not using IRA’s already, it’s a good way and an easy way to get more capital invested in your deal without really having to go out and find that new investor… Because you already have your stable of investors that you’re working with, many of whom don’t realize that they could invest more with you or invest in different projects by simply using their IRA accounts.

So we provide this landing page, we can provide some other marketing collateral that’s somewhat personalized for your company and your syndication, to help you reach out to those individuals, and kind of just letting people know that if you are interested in the deal I’ve put together – I’ve put together this syndication; here’s my ideas for an investment and I need capital… Just letting the individuals know “Here’s another resource for you to put that money in the deal, because you might have a lot of investors who would like to invest more, they just don’t think they have it, because they’re looking at their savings account or their own personal accounts, not even thinking that “My IRA or my 401k that’s been sitting there for years could even be used.” So you’re right, we turn to those gatekeepers and let them know “Hey, here’s another way to raise capital.”

Just a quick side-story – we had a company here in the St. Pete area in our Tampa Bay market that was raising private capital for their new startup insurance company. They included just a couple blurbs about self-directed IRA’s in our company in one of their offering pieces and were able to raise several million dollars more in capital just from letting the people they already were working with know that they could buy additional shares or make additional investments using an IRA account. That was obviously very powerful for them, and we’ve seen other syndicators that have used that type of platform be successful as well.

Joe Fairless: What is your best advice ever for real estate investors?

Scott Maurer: I think for when it comes to IRA’s it’s if you’re working with other people. If you’re a real estate investor out there and you are looking for more capital – and it seems a lot of real estate investors typically are; you’re always looking for your next deal – is to keep the IRA in mind when you’re talking to someone else. Not something that’s gonna be the panacea for all capital raising needs; you’re not gonna run into people that always have IRA’s available… But remembering however that there’s option out there, because again, I think a lot of people are unaware that an IRA could even be used in that context to make an alternative investment, number one. And number two, they’re not happy with where their funds are sitting. So not only do they not know it’s possible, they have their money sitting maybe in a CD, or maybe it’s in a stock market that’s great one year, but they know there’s gonna be a correction coming at some point, they don’t wanna be on the wrong side of that correction – it gives them the ability to put that money with you into something else, something alternative that’s not tied to those other markets. I think that’s the best piece of advice for a real estate investor.

Sure, a self-directed IRA can be great for you if you have your own IRA, but don’t forget about the millions of other people that have retirement accounts as well, that could help provide capital for your deals.

Joe Fairless: And how can the Best Ever listeners get in touch with you?

Scott Maurer: They can reach out to me, I have a 0800 number – 0800 425 0653 – and simply ask for Scott. They can visit our website at AdvantaIRA.com. Go to our Meet the Team page, you’ll see my picture and you can click right on there to send me an e-mail.

Joe Fairless: Scott, thank you for being on the show and talking to us about self-directed IRA investing, the things we can’t invest in – life insurance, collectibles are things we can’t do – and things we can invest in. Then the creative solution that you came up with or really had to think through, with the one scenario that we talked about with setting up a business, and then the approach that you take to building out the business and building out new leads and building relationships.

One, you identify who your target audience is, who happen to be gatekeepers, and then you have an education platform and then you build relationships through that education, and it’s a spiral up effect.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.